The real estate market of the United States can be volatile and uncertain due in part to effects from many external factors. For example, the strength of the local economy, seasonal variations, inflation, interest rates, and other factors all influence the direction of the real estate market. Further, the real estate business is important to the general welfare of the public, with hundreds of thousands of jobs directly related to the housing industry. These include real estate agents, construction workers, bankers, architects, engineers and developers; all of whom rely upon the real estate market for their livelihood. For many of the rest of the population, a real estate purchase represents the single largest investment of their lifetime.
Thus, given the importance of the real estate market, it would be prudent to accurately monitor the relative strength or weakness of a real estate market on a local, regional and national basis. This ability would directly benefit not only those people who are responsible for management of and strategic planning for companies active in the real estate industries, but also all of those who are involved with the purchase of real estate. In addition, in order for banking institutions and other lenders to make a reasoned determination as to whether the extension of credit to a purchaser of real estate is prudent, it is important for these lenders to accurately gauge whether the overall market strength is increasing or decreasing. Similarly, other service organizations such as mortgage and title insurance providers require the same accurate information in order to make their insurance decisions.
Although a number of sources periodically publish various items which can be indicative of activity in parts of the real estate market, such as mortgage interest rates, inflation rates, and/or housing starts, to a vast majority of the population, these figures are relatively narrow and limited in their focus. Moreover, although for a given market, multiple-listing services (MLS) compile various figures as to the selling price of various properties, and other types of numerical data, similarly, these figures are not singularly informative as to the overall strength of the housing market. Nor do they provide a standardized method for comparing different market segments or market locations.
Over the past decade U.S. banks as well as government and private insurors suffered substantial losses related to loans on real estate. If given a standardized system of tracking the strength of our nation's real estate markets in years past, it is probable that the extent of losses attributable to real estate loans would have been considerably lower. For example, the banks could have used the method and apparatus of the present invention to guide their lending decisions.
The method of the present invention as described herein provides a technique for monitoring the strength and trends of a real estate market, whether nationally or locally. Based upon data gathered from the real estate brokers' Multiple Listing Service (MLS), an index which is indicative of the strength of a market may be generated. From a sequence of these indices, the relative strength (trend) of the market can be obtained. Further, real estate service providers, such as governmental or private mortgage entities could use the indices to guide their business decisions.
The method of the present invention can also be used to monitor the strength and trends of other markets. Exemplary, but non-limiting examples may be the market for used yachts or airplanes, providing sufficient market data records are maintained.